The Hindu Business Line : Most banks comfortable with tractor loans

State Bank of India seems to have been an exception with regard to a bitter experience in the tractor financing business. Ask any other bank about whether it had a similar experience and the answer is NO.

Andhra Bank is comfortable with the health of its tractor finance portfolio and the non-performing assets (NPAs) in this segment are less than Rs 1 crore in the total portfolio of Rs 230 crore,

Mr A. L. Nageswara Rao, Chief General Manager (Agri Credit), Andhra Bank, said. “`We have over 9,000 accounts that have a very good and healthy exposure to the segment.

The payment is half-yearly and is based on the crop seasons,”’ he said.

The reason for comfort in tractor financing for the bank was the tougher due diligence being adopted for sanctioning of tractor loans, he added.

Indian Overseas Bank’s General Manager, Dr S. Elangovan, said that the tractor portfolio of the bank was at about Rs 150 crore.

He said that these loans were availed by a segment that was relatively affluent and there was no problem because of careful screening at the entry level.

The Mangalore-based Karnataka Bank Ltd also does not see any problem related to financing of tractors.

Mr Ananthakrishna, Chairman and Chief Executive Officer of the bank, told Business Line that of the Rs 30 crore lending to tractors, the NPAs may be in the range of Rs 14 lakh or so. The total agriculture portfolio of the bank is around Rs 1,000 crore. He said that the bank has not put on hold fresh lending to agriculture sector.

No big exposure

Corporation Bank echoed the same views and does not see any problem in lending to tractors and farm mechanisation segments.

Mr B. Sambamurthy, Chairman and Managing Director of Corporation Bank, told Business Line that the bank does not have big exposure in this segment.

“We have a normal portfolio. I don’t have problem issues in this segment. We have not put on hold fresh lending to tractors or farm mechanisation,” he said.

Stating that the total agriculture portfolio of the bank is more than Rs 3,000 crore, he said the overall agriculture NPA is around 2.5 per cent.

UCO Bank is comfortable with its portfolio of agricultural advances, including those to tractor loan and farm equipment, said Mr V. K. Dhingra, Executive Director of the bank.

The total agricultural advances of the bank were at Rs 8,000 crore during 2007-08, with loan to tractors and farm equipment constituting 20-25 per cent of the portfolio, he said.

The net non-performing asset in agricultural loans stood at 3 per cent. Recovery, though late, has, however, not been a big issue for the bank as defaults were not very high, said Mr Dhingra.

“The payment is sometimes delayed because of various reasons such as crop failure or a natural calamity, but the recovery is certain,” he said.

Yet to assess

Allahabad Bank is yet to assess the portfolio of advances made to the farm equipment and tractors segment, said a senior bank official. Agricultural advances of the bank stood at Rs 9,200 crore during 2007-08.

Meanwhile, the State Bank of India Staff Association has urged the bank management to reconsider its decision of putting on hold financing to new tractor and farm mechanisation activities.

“The decision of SBI Management is deplorable as it will compel farmers to borrow from moneylenders, defeating the very purpose of bank nationalisation," said a press release from the association.

( With inputs from Shobha Kannan, G.Naga Sridhar, A.J.Vinayak & N.S.Vageesh)

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